Simon Read: Buying a home is no longer a road to easy wealth but renting can free finances
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Your support makes all the difference.There was grim news for homeowners from the IMF this week after it warned of the danger of an "extended housing market slump". Its analysis suggests that, despite widespread price falls, property values are still 30 per cent above their historical averages compared with people's incomes.
As such, the IMF warned, prices could drop by another 10 to 15 per cent. That wouldn't just hit individuals, of course, but would lead to a further squeeze on consumer spending, extending the length of the current downturn.
But a correction of that magnitude would be good news for first-time buyers, moving more properties to within their grasp. That's provided that there is still an appetite among young people to own their own homes. A survey published earlier this week suggested otherwise.
It showed that almost a half of those people currently renting would be happy to rent long term if there was less pressure in the UK to own a home. OK, the research was conducted by SpareRoom.co.uk, a house-share website.
But as more people are forced into renting over the long term, could we really be approaching a sea-change in our attitude to property ownership?
Why are Brits so obsessed with owning their own home? There are lots of attractions to renting, not least the fact that any problems with the property have to be sorted by the owner, not the renter. With no sudden maintenance costs to meet, renting can actually be a good long-term deal.
It's also worth bearing in mind that renters don't have to pay stamp duty, which now has a top rate of 7 per cent, which buyers must stump up when they purchase their home. Renters also avoid the legal and conveyancing fees that buyers have to meet.
There's also the fact that if you're renting, you have more flexibility in terms of moving home. That should particularly resonate with all those people sitting with negative equity on their property.
The fact that they owe more than the property is worth means very few will be able to take the loss if they want to move homes. In other words, they're trapped.
On the other side of the coin are two fundamental things. First is the fact that, historically, property has been a safe and secure rising asset. People have been able to bank on the fact that their home will improve in value, giving them a valuable financial resource to call on if they need it.
Traditional received wisdom suggests that money paid into a mortgage to buy a home is an investment, while rent is "simply throwing money away". But the world has changed. The housing market has not risen since the crash in 2008 and shows no signs of climbing again. If the IMF is to be believed, the opposite is true.
How long do we have to go before we wake up to the fact that, at present, the traditional view of your home being your most valuable asset doesn't apply any more if you're a potential first-time buyer.
Rather than risking your savings on a massive deposit and the associated property purchase costs, choosing to rent as a long-term decision could actually make sense.
Nick Wooldridge, of Stacks Property Search, says people must change their attitude towards renting. He thinks we should move closer to the European model, where people are happy to rent for years or even decades.
"One of the main reasons people prefer to buy is because renting doesn't allow them to personalise the property," Nick says. "They are reluctant to spend money on something that isn't theirs; and that they may not stay in for long.
"But if tenants viewed a property as a longer-term proposition, they might see the value in making improvements, and customising the property to suit them.
"My advice to tenants would be to realign their perception. Rather than seeing renting as a wilderness period between purchases, see it as a better-value alternative to short-term ownership. Renting can help avoid making costly mistakes."
Long term, most believe that the property market will recover somewhat. But it may never reach the historic levels which turned generations of homeowners into speculators. In other words, the profits we've become used to may have simply gone.
Once you strip out the idea of a home being a financial investment, then you focus on finding the best home. And that could just as easily be a rented one.
s.read@independent.co.uk
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